GILLARD: Close economic relationship between the two of us. We will be considering the work of that joint productivity commissions approach tomorrow. It's the first time it's been done, getting our Productivity Commissions to work together. Whilst I don't think we will be able to respond at depth and in detail to all of the recommendations of that report, I'm looking forward to discussing that report with Prime Minister Key and what work we can do based on it.

In addition, I'm looking forward to talking to Prime Minister Key about a set of challenges and issues that Australia and New Zealand face in our world.

HILL: Australia's Prime Minister, Julia Gillard. The ABC's political reporter, Anna Henderson is with the Australian party and we cross to her live now.

Anna, what are the challenges the two countries face, that the two prime ministers will be talking about in Queenstown?

HENDERSON; Well in terms of these key challenges on the economy and on trade ties. I think they are not particularly concerning. There won't be a lot of head butting together in this relationship. Tomorrow's talks are being slated as a fairly familiar and friendly discussion about how to improve the trading investment ties between the two nations. We haven't been given a lot of detail about what will be in this report, that will be released tomorrow to know exactly where the particular issues will be. They'll be the focus of the talks, but certainly what we saw this afternoon from both Prime Ministers was on this particular issue of economic ties. They're both looking forward to a very happy negotiations.

HILL: There's very strong defence ties between the two countries and, of course, they'll both be putting their heads together to plan for the commemorations of the ANZAC Day Centenary, which is coming up in 2015?

HENDERSON: Yes, we are going to see over the course of the weekend some formal discussions when the bilateral talks get underway tomorrow on the issue of how to plan for that 2015 Centenary Commemoration of ANZAC. But also it's interesting to see some of the defence analysts who've looked at this issue of the two nations and believe that overtime Australia's defence White Papers have slowly watered down New Zealand's-Australia's defence policy and, of course, New Zealand doesn't really have the same amount of money to work with in terms of providing a defence capability and there is an inter-reliance between the two countries, but on the otherhand, there hasn't been as much reliance on New Zealand in recent years and some analysts are saying that would change.

I did ask the Prime Minister, John Key, whether or not that would be discussed tomorrow. He said of course it will be on the agenda, but he wasn't looking particularly positive about the idea of New Zealand being bought into the tent, or consulted in any detail on the defence White Paper that Australia's drafting.

HILL: Some people have raised this issue of New Zealand citizens living and working in Australia, many of whom are under a particular visa which doesn't them offer them a path to citizenship and some people have suggested that although they pay taxes, they're not eligible for health and education benefits. Has this issue been raised or is it going to be raised between the two Prime Ministers at all?

HENDRSON: Both leaders were quite coy when they were pressed on that issue in the various press conferences this afternoon. But it seemed from Prime Minister Julia Gillard's side that it's unlikely they'll be development on that tomorrow. She didn't say outright, that was the message a lot of journalists took away from that meeting and in terms of the otherside, John Key was actually asked whether or not he'd consider removing some of the benefits that New Zealand provides to Australians when they come the other way, and he said, no, that would be a spiteful thing to do. We're not considering doing that in response and he'll continue to lobby the Australian government to change the rules in Australia.

HILL: OK. What are the other issues up for discussion between the two leaders?

HENDERSON: The two leaders will also be discussing some areas of regional interest. There was some suggestion today about the potential for discussions on asylum seeker issues. We won't be able to gleam much detail about what that means, but in the past, there has been a reciprocal arrangement between the two countries whereby asylum seekers did come to New Zealand more than a decade ago, whether or not there are going to be talks about renewing some of those ties, John Key in his press conference also said, and he has said this before that it's only a matter of time before asylum seekers trying to reach other countries by boat do make it to New Zealand and he wants to be in a coordinated situation with Australia to try and deal with that. And there are already some links between the two countries in Border Protection and Customs sense and I believe that those will be strengthened tomorrow.

HILL: And what about the question of whaling in the Southern Ocean, the Japanese whaling fleet. The two have cooperated in the fight against that whaling fleet in the past, haven't they?

HENDERSON: They have, and this was raised at the last meeting in Melbourne, last year, when both leaders discussed the issue of whaling. It's not clear how much of a focus that will be this time and because there are these other kind of burning issues on the agenda, asylum seeker issues now appear to be quite significant on the agenda and the economic ties. In terms of prominence, I think it will be canvassed, but perhaps not in as much detail as it has been in the past.

HILL: The setting for this meeting is Queenstown. It's rather spectacular. Do you think Julia Gillard might be quite impressed by the scenery?

HENDERSON: Well, I think this must be the New Zealand Prime Minister's aim to bring the Australian media and the Prime Minister and her entourage to Queenstown. It's absolutely spectacular. As soon as you land at the airport in Queenstown, you're immediately surrounded by this majestic mountain ranges. Even when you fly in, you're surrounded by these mountains as you touch down. So it be one of the most beautiful rides into an airport anywhere in the world I'd say. And I think that is a real aim here, because the New Zealand Government does want to bolster the Australian tourism market. It's crucial to the survival of places like Queenstown, and no doubt, they're hoping that backdrop will feature in lots of the news reports that are on television.

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